Release Date: June 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sales were up almost 1% versus last year, indicating a positive trend.
- Gross margins expanded by 80 basis points to 32.8%, driven by strong inventory management and DTC growth.
- US retail sales increased by 1.4% year-over-year, showing progress in strategic initiatives.
- Athletic and casual categories outperformed, with athletic sales up 15%, indicating strong consumer demand.
- The acquisition of Rubino is expected to be immediately accretive, expanding DBI's presence in Quebec.
Negative Points
- Comparable sales declined by 2.5%, indicating some challenges in maintaining customer engagement.
- Seasonal footwear and dress categories experienced softness, with dress posting a negative 7% comp year-over-year.
- SG&A expenses increased to 31.2% of sales from 28.9% in the prior year, indicating higher operational costs.
- Net interest expense rose to $11.6 million from $6.6 million in the prior year, impacting net income.
- Canada retail segment comps were down 4.9%, reflecting reduced consumer discretionary spending.
Q & A Highlights
Q: Could you elaborate on the comp sales trend throughout the quarter and what it implies about May?
A: We exited Q1 stronger than we entered it, and this trend has continued through May. We are confident in our efforts to elevate the assortment, particularly in the athletic category, which saw a 15% increase in Q1. This sets us up well for the back-to-school season.
Q: Can you discuss the impact of the Rubino acquisition in Canada on your top-line expectations?
A: Rubino generated $47 million in sales last year, and we will register three quarters of that in this year. The acquisition is expected to contribute similarly to our overall Canadian segment, and we anticipate it to be immediately accretive.
Q: Could you provide more detail on the SG&A acceleration and any specific factors contributing to it?
A: The increase is primarily due to returning to a normalized incentive compensation posture, which was removed last year. This accounts for over $30 million and is evenly dispersed across all four quarters. Additionally, we executed a reorganization resulting in $12 million of savings this year.
Q: What are you seeing in the promotional environment for the US retail business?
A: We invested fewer markdowns than in Q4 and are piloting more targeted offers. The promotional activity remains steady, acknowledging the uncertainty in the economy. We saw favorability in our promotional strategy versus Q4, which is incorporated into our guidance.
Q: Can you provide more details on the strategic initiatives to drive growth in the US retail business?
A: We are focusing on reinvigorating the assortment, optimizing marketing investments, and enhancing the omnichannel shopping experience. Our efforts in athletic and casual categories have shown significant growth, and we are leveraging consumer insights to evolve our assortment.
Q: How is the integration of new leadership impacting the company's strategic direction?
A: New leadership, including Sarah Crockett as Chief Marketing Officer and Andrea O'Donnell as President, is bringing extensive experience and fresh perspectives. Their focus on customer acquisition, retention, and brand strategy is already contributing positively to our strategic initiatives.
Q: What are the key priorities for the brand's portfolio under the new President, Andrea O'Donnell?
A: The immediate focus is on reducing costs, right-sizing the organization, increasing margins, and streamlining operations. We aim to build a foundation for profitable growth and leverage our strengths to grow sales and margins, particularly in key women's categories and licensed brands.
Q: How are you addressing the categories that are not resonating as strongly with customers?
A: We have enacted prudent inventory controls for categories like seasonal and dress footwear, which have shown softness. We will continue to monitor trends and manage inventory levels and assortment planning accordingly.
Q: What are the expectations for the second quarter and the rest of the fiscal year?
A: We expect net sales growth in the low single digits and comparable sales to improve sequentially. The third quarter is projected to be the strongest for sales growth, with the fourth quarter being the weakest due to the loss of the 53rd week. We reaffirm our annual adjusted earnings per share guidance of $0.70 to $0.80.
Q: How are you enhancing the omnichannel experiences for customers?
A: Digital demand achieved strong mid-single-digit growth, and we are piloting new store layouts with positive reception. We are committed to enhancing the client experience both in-store and online and will continue to evaluate new opportunities to drive omnichannel growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
